SAKHALIN PROJECT MIRED IN JURISDICTIONAL DISPUTE

Petroleum development off Sakhalin Island has fallen victim not only to splintering of the Soviet Union but to demand for economic and political autonomy in the Russian republic's far east. Valentin Fyodorov, the radically minded governor of Sakhalin, recently agreed to help pressure Moscow for more assistance by threatening to form a huge Far Eastern Republic. Besides Sakhalin, the proposed entity would include the gas prone Yakut Autonomous Republic, the Maritime and Khabarovsk

Dec. 16, 1991

4 min read

Petroleum development off Sakhalin Island has fallen victim not only to splintering of the Soviet Union but to demand for economic and political autonomy in the Russian republic's far east.

Valentin Fyodorov, the radically minded governor of Sakhalin, recently agreed to help pressure Moscow for more assistance by threatening to form a huge Far Eastern Republic. Besides Sakhalin, the proposed entity would include the gas prone Yakut Autonomous Republic, the Maritime and Khabarovsk territories, and Amur, Kamchatka, and Magadan regions.

Meanwhile, the Moscow business newspaper Kommersant has described in detail the heated feud between Sakhalin administrators and the Russian republic. It said an "international committee of experts" will recommend which petroleum companies will develop Sakhalin's offshore oil and gas fields.

DISPUTE DEEPENS

Previously, Japan's Kyodo News Service had quoted the Soviet news agency Interfax as reporting Fyodorov would hold a new international tender for development of offshore Sakhalin oil and gas resources. Interfax said application forms will be sent out by early February to enterprises interested in participating in the tender.

Kyodo said the report came as a surprise to Japanese and other firms that have submitted bids for the project in a tender jointly sponsored by the Soviet Oil and Gas Ministry and the Russian republic's State Committee on Geology and Utilization of Fuel, Energy, and Mineral Resources. According to Kyodo, the chief representative of Sodeco (Sakhalin Oil Development Cooperation Co.) in Moscow said a selection committee formed by representatives from the Soviet Union, the Russian republic, and Sakhalin province is examining bids submitted in the previous tender. The Interfax report did not specify the previous tender was void.

Kommersant reported differences between Sakhalin's administrators and Deputy Chairman of the Russian Council of Ministers Yegor Gaidar threaten to disrupt the sale of Sakhalin offshore development rights. It said Sakhalin representatives were scheduled to hold talks by December with the Russian Council of Ministers to determine who controls the island's offshore oil and gas resources.

SAKHALIN VENTURE CHRONOLOGY

As explained by Kommersant, the often confusing chronology of the proposed Sakhalin offshore development deal (OGJ, Dec. 9, P. 37) follows:

In May, 1991, Anatoly Cherny, director general of the Sakhalinmorneftegas (Sakhalin Offshore Oil and Gas) Association said the Soviet Ministry of Oil and Gas decided to set up a joint venture involving his association.
Sakhalinmorneftegas then announced an international tender. Mobil Oil Corp., Amoco Corp., Exxon Corp., Royal Dutch/Shell Group, a combine of Mitsui Co., Marathon Oil Co., and McDermott Inc. (MMM), and Japanese and South Korean companies in various groups joined the bidding.
The tender review committee was formed by the Russian Ministry of Fuel and Energy, which succeeded the Soviet Oil and Gas Ministry. A review was held late last summer, and the project was awarded to the MMM group.
On Oct. 5, Sakhalin Deputy Govs. Viktor Sirenko and Valery Mozolevsky declared the summer tender void. They asked all foreign bidders to undertake additional commitments to overhaul three Sakhalin ports, mines, and a railroad and to develop health and social instructures. The foreign bidders agreed to the terms and increased the project cost.
Sirenko said Sakhalin administrators sent a petition to Russian President Boris Yeltsin asking that the tender be put under the jurisdiction of the Sakhalin administration and the Russian republic's State Anti-Monopoly Committee. Yeltsin on Nov. 12 agreed and approved the Sakhalin administration's decision to annul the results of the summer bidding.
Qaidar, however, challenged Yeltsin's decision. Sirenko said the new Russian government does not want to share control over development of offshore Sakhalin fields with local authorities.
A Mitsui official said his firm would not start work on the project without guarantees from the Russian government.